Income will be defined in the Bill, but I may say it is the net profit or gain arising from any business in which a person, as defined in the Act, is engaged-salary, income from investments whether stock, mortgages, or otherwise. In other words, we have endeavoured to give
a definition of income as wide as possible so that everybody in Canada shall be subject to the tax, provided the income is over the amount of exemption.
" Income " means any income, not deducting living expenses. If a man has a "business and his gross receipts are, say, $100,000, but his operating and under expenses are $50,000, the income would be $50,000. Of course you cannot tax a man on his liabilities.
with a man's own business, yes; in connection with a man's own home I should say no, however that is a question which we will have to deal with a little more fully in committee.
I may say this measure applies to the income of the present year. It provides for returns by all parties subject to the tax before February 28 of next year. There are a number of exemptions under the Act, mostly of those institutions that do not operate for gain. I do not know that it is necessary I should specially refer to them here. Apart from those exemptions which I shall be glad to mention in , committee and take up more particularly when the Bill is before the House, there are certain exemptions which I should mention here. My horn. friend from Wright very properly asked .as to whether those who are paying a very heavy business profits taxation are subject to this income measure.. The House is aware that liability to the Business Profits War Tax Act of 1916 and the amendment thereto of this year comes to an end on December 31 this year, and it is not the intention to renew that measure. When that measure was imposed it was retroactive to the extent of one year so that in 1916 firms and companies subject to its provisions paid in respect of their profits of 1915; those liable on account of their profits in 1916 paid this year and those liable in respect of any accounting period falling dn during this year, 1917, pay the tax next year. I think it is only just and proper that those who pay the very heavy business profits tax-much heavier than this tax- upon an accounting period falling in during the present year should not be called upon to pay this income tax unless it chances to 239
be heavier than the tax they are paying. The result of that view is that we shall exempt from the taxation which would be payable by such firms and companies under this measure the amounts paid by any taxpayer under the Business Profits War Tax Act, 1916, and any amendments thereto for any accounting period ending in the year 1917. In the case of a partnership, each partner shall be entitled to deduct such portion of the tax paid by the partnership under the Business Profits War Tax Act, 1916, as may correspond to his interest in the income of the partnership. In addition to that, we provide that taxpayers shall be entitled to deduct from the amount which would otherwise be payable by them for income tax under this measure the amount paid by them for taxes during the year 1917, and in any year thereafter, under the provisions of Part 1 of the Special War Kevenue Act, 1915. That means that if the taxation under the Special War Revenue Act, 1915, is greater than the income tax, they pay the greater taxation, but if, on the other hand, this income tax is greater than the tax to which they are now subject, they are permitted to deduct from the income taxation the tax to which they are liable under the Special War Revenue Act, 1915.
I will come to that. We are providing in the legislation also that we shall levy an income tax on corporations and joint stock companies earning an income exceeding $3,000. In England there is no super tax upon companies, but their shareholders are liable to it. We are providing by this measure that joint stock companies and corporations shall be subject to a tax of four per cent. Their shareholders are liable not only to the tax of four per cent but to the super tax. But, in estimating the income of any person subject to the tax, we credit him with the amount which has been paid by the company from which he derives dividends under the provisions of this Act, the idea being to avoid double assessment. Let me give a concrete ease.
Yes. That question gives a great deal of difficulty. In Great Britain they have not imposed a super tax upon corporations or companies. In the
United States they have an income tax called the normal tax to be paid by corporations and joint stock companies. They provide-and we have similarly provided- that, while the shareholders of these companies are subject to the super tax, the amount of the normal tax upon dividends shall be deducted from their income. It will be obvious to the committee that it is not possible to impose the super tax upon a company, much as we should like to do so, for this reason: Take a company that is owned by hundreds of shareholders, that has a capital of $1,000,000 and that earns six per cent; it would have an income of $60,000. Take another company with $2,000,000 capital and which earns six per cent; it has an income of $120,000. Although both derive six per cent, if you applied the super tax, because the income of the $2,000,000 company is larger than that of the $1,000,000 company, you would make one set of shareholders pay so much more than another set of shareholders. Accordingly, we get over the difficulty by making joint stock companies and corporations subject to a four per cent tax, called the normal tax, and then we make their shareholders liable to a super tax giving them an allowance equivalent to the normal tax upon the dividend that they derive from such companies.
If my hon. friend is a holder, as I hope he is, of the shares of any corporation either in this country or any other country, he will be liable to pay in respect to the income derived from such companies no matter whence or how it is derived. If my hon. friend has such income, he has to pay provided he is a resident of Canada.
In the case of a resident of Canada, if he was taxed in respect of his dividends in a fqreigri country, he would be entitled to deduct tHe amount of such taxation from his income for the
purpose of ascertaining the amount on which he should be assessed here. So far I have not been able to reach a conclusion, although I am glad to have an open mind on the matter, that he should be allowed to deduct the amount of such tax from the taxation which he would pay upon his entire income.
Yes, I am speaking of a foreign corporation domiciled in a foreign country and carrying on business in Canada, but if a Canadian company carries on business here and throughout the world you assess it on its entire income.